PROJECT REPORT

ON

“AN INDUSTRY ANALYSIS OF

TELECOMMUNICATION SECTOR”

UNDERTAKEN AT
DEVASHISH SECURITY PVT LTD

Submitted By:
AMIT.I.PANDEY
(08MBA41)

Guided By:
DR.ANIL SARAOGI

MBA PROGRAMME
(Year 2008-10)

SHRIMAD RAJCHANDRA INSTITUTE OF

MANAGEMENT AND COMPUTER APPLICATION

1
 COLLEGE CERTIFICATE
This is to certify that the Summer Project report
entitled “AN INDUSTRY ANALYSIS OF
TELECOMMUNICATION SECTOR” has been carried
out by Mr. Amit Pandey with ID- 08mba41 at
Devashish security Pvt. Ltd, as a partial fulfillment
of the requirement for the degree of Master of Business
Administration (M.B.A.) during academic year 2009-10.

(Dr. Anil Saraogi) (Dr. Bankim

Patel)

FACULTY GUIDE DIRECTOR

Date:
Place: Gopal vidyanagar

2
 DECLARATION

I, AMIT.I.PANDEY here by declare that the project

report entitled “ AN INDUSTRY ANALYSIS OF
TELECOMMUNICATION SECTOR” is based on my own
work and my indebtedness to other work / publications,
if any have been duly acknowledged.

AMIT PANDEY
(08MBA41)

3
 ACKNOELEDGEMENT

This project has been made possible through direct and indirect co-
operation of some person for whom I whish to express my heartfelt
gratitude.

I express my heartfelt gratitude to eminent organization “DEVASHISH

SECURITIES PVT.LTD.” for providing me with such a glorious opportunity
and furnishing me with much of the precious time and resources during
my training.

My sincere thanks to Mr. ASHISHBHAI DESAI (Director of the Security) and

Ms. Shah Foram (Company Guide) and other staff members those have
spent their precious time with me and in fulfilling the requirement of this
project. Without their help these project impossible.

I am very much pleased to express my heartiest gratitude to our

vulnerable director Dr. BANKIM PATEL for providing me with such a
glorious opportunity for learning practicality of bookies concepts.

I pay my heartiest gratitude to my college mentor Dr. ANIL SARAOGI sir,

who has provided me with the valuable suggestions, support and
guidance during my training to successfully complete my project work.

4
 AMIT PANDEY
(08 MBA 41)

EXECUTIVE SUMMERY

The telecom industry is the fastest growing industry in the Indian

market. It has a customer abase of around 250 millions. The research was
conducted to analysis the emerging trend and opportunity exist in the
telecom sector.

With this objective in the mind I have started the research. The
research was descriptive in nature and a secondary data collection
method was used.

Indian telecom is more than 160 year old, beginning with the
commissioning of the first telegraph line between Kolkata and diamond
harbor in 1839. In 1948, India had only 0.1 million telephone connection
with a telephone density of about 0.02 telephones per hundred
populations. By 2010 there were 500 million telephone (including cellular
mobile) connections in the country with a telephone density of 13.96
telephones per hundred populations.

After the research was completed the data were analyzed on the
chosen parameters. This analysis data was late converted in to form of
graphs these was to make result easily comprehensible by anyone going
through the report. This is also made at easy to draw conclusion based on
the research and provide a presentable format of the report. Later on this

5
 information was complied in the form of presentable and highly
comprehensible report.

In fact, Indian has achieved its target of reaching 250 million

telephone subscribers by 2007, two months before time. Simultaneously,
overall tele-density has increased to 233.21 percent.

Table of content
Sr. No. Topic Page No.

1 ABOUT THE COMPANY 7

2 LITERATURE REVIEW & ABOUT THE TOPIC 11

2.1 Literature Review

2.2 About the topic

3 RESEARCH METHODOLOGY 37

3.1 Problem statement

3.2 Research objective
3.3 Research design
3.4 Data collection method
3.5 Method of analysis

4 DATA ANALYSIS & INTERPRETATION 39

5 FINDINGS 62

6
 6 RECOMMENDATIONS 63

7 BIBLIOGRAPHY 64

1. ABOUT THE COMPANY

During June 1996, Devashih started as Devashish Investment, a family

firm with partners Krishnakant Desai and His son Ashish Desai as
partners. Senior Partner Krishnakant Desai had long experience as
Accountant in Bardoli Sugar Factory and in Sardar Bagayat (co-operative
Mandali).
Devashish Investments with a gallop start as Financial Advisors due to
overwhelming support from surrounding residents of Bardoli areas was
converted into Devashish Securities Pvt. Ltd. within three years.

Company has pleasure to introduce our selves as leading Investment

counseling company in and around Bardoli. Our aim is full satisfaction of
our valued Customers and our motto is “Service before self.

Devashish also have our two sister concern, Devashish Commodities Pvt.
Ltd., and Devashish Advisory Services Pvt. Ltd. Devashish Commodities
Pvt. Ltd. is approved recognized member of India’s only Multi-
commodities Exchange(MCX), having rating of Asia’s third Commodity
Exchange are operating in Surat, Songadh, Unai, Palsana, Bharuch,
Ankleshwar & Kamrej.
Business

7
• Broking
 Equity Broking

 Derivatives Broking

 Commodity broking

Devashish Securities Pvt. Ltd. is one of the leading providers of broking

services to individuals and institutions in the equity, derivatives and
commodities segment in around the areas of Bardoli.
Company proactively delivers the full depth and breadth of our
broking services to clients through a network of our branches and
franchises across the South Gujarat.

Distribution

 Mutual Funds

 Insurance Life-non Life

 Initial public offering (IPO)

With the objective of meeting all the investment needs of our clients, we
provide distribution services of mutual funds and IPOs. We are an AMFI
registered mutual fund distributor and are also registered with all the
AMCs in India to sell the schemes offered by them. Our distribution
network is backed by in-depth & comprehensive research and a strong
team for marketing and sales support.

Devashish has a dedicated team exclusively for research on mutual funds

and IPO. Company provides monthly publications on mutual fund activity
and fund recommendations and also furnishes reports on New Fund
Offers (NFO) and forthcoming IPOs’ recommendations. Our
recommendations are objective and unbiased. For us, the client’s growth

8
is the top priority.

Consistent delivery of high quality advice on mutual funds and IPO

investment has established us as a competent and reliable distributor
across the South Gujarat. We are also amongst the few investment firms
that offer the facility to invest in mutual funds and IPO online, giving our
clients freedom from paperwork and making investing convenient for
them.

• Depository Service

○ Shares
Devashish depository business helps us in providing integrated financial
solutions to our clients. It is led by a team of professionals and the latest
technological expertise, dedicated exclusively for the depository services.
This creates a seamless transaction platform for clients – to execute
trades through Devashish Securities Pvt. Ltd. Business and settle them
through Devashish Securities Pvt. Ltd. Depository Services.

Why Choose Devashish

➢ Personal Relationship
At Devashish, company believes that it is not just the product or service
that we are offering; it is a relationship with our clients which makes us
alive. Being a client you deserve a personal relationship based on trust,
reliability, understanding and respect. This relationship is the real wealth
for us from whom we will make our value & Image in the Market. Our aim
is full satisfaction of our valued Customers and our motto is “Service

9
before self”. We believe to fulfill your need first & ultimately it’s the way
to fulfill the need of ours
➢ Comprehensive Research
Company can help you for better financial portfolio solutions through our
in-depth, unbiased research. Whether you want help managing your own
portfolio or want us to manage it for you, you’ll get investment guidance
and portfolio planning that’s right for you. Our research team will offer
excellent investment opportunities, will help you identify significant
market trends, and will make sure that the information reaches you at the
earliest. We provide an integrated approach of fundamental and technical
research
➢ Array of products and services
Company offer wide range of investment products and services that
makes your Portfolio sounds enough for saving and support. Equities,
derivatives, commodities, depository, IPOs, mutual fund, Pan Card
Collection center no matter what investment-related service or product
you need, you can get it at Devashish

Quality Policy and Mission

Quality Policy
Dedication: Company dedicates ourselves in consistently delivering
more than customer expectations and believes in customer delight. To
achieve this, we have utilized our human and technological resources to
provide superior quality financial services.

Efficiency: We are efficient and committed to total quality by putting our

best at our resources and services at optimum cost and strive continually
to improve ourselves, our team and our services to get total customer
satisfaction.

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Valuation: Company will achieve our objectives through creation of a
strong, responsive, and innovative organization by a total quality
commitment and by emphasizing on total customer satisfaction, wealth &
Value creation of stakeholders through profitable growth and providing
best working environment to our employees

Mission:
To create enduring value for customers and stakeholders by
providing total quality products & Services at optimum cost, through
creation of a strong, responsive and innovative organization and strive
constantly to improve ourselves, our team & our services to meet
customer expectation.

2. LITERATURE REVIEW & ABOUT THE

TOPIC

2.1 LITERATURE REVIEW

As my project report concern first I refer s.kevin “Portfolio

Management & Punithavathy Pandian, “Security Analysis & Portfolio
Management” Edition, Vikas Publishing Housing Pvt. Ltd, 2007.books for
the purpose of to obtain knowledge of industry analysis. I take
telecommunication sector due to analysis of telecom sector in India. The
telecom industry is the fastest growing industry in India despite the
recession telecom industry is a one which is not influence.
For the purpose of industry analysis of telecommunication sector, I

11
collected data from website as www.businesstoday.intoday.in,
www.nseindia.in, for history of telecommunication I go to www.trai.gov.in
website. I obtain quote of five major companies in India and then
calculating the averages for all ratios. I take SWOT analysis for the
telecommunication industry.

2.2 ABOUT THE TOPIC

TELECOM:

The word “Telecom” (which is an abbreviated version of '

telecommunication’) in real sense refers to the transfer of information
between two distant points in space. This meaning however, has been
subjected to modifications in accordance with further innovations made
be the Telecom Industry.

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Industry:

A clear indication of the way in which human effort has been

harnessed as a force for the commercial production of goods and services
is the change in meaning of the word industry. Coming from the Latin
word industrial, meaning "diligent activity directed to some purpose," and
its descendant, Old French industries, with the senses "activity," "ability,"
and "a trade or occupation," our word (first recorded in 1475) originally
meant "skill," "a device," and "diligence" as well as "a trade."

Industry analyses:
An Industry Analysis is an assessment of the profitability of an
industry. In order to perform this assessment, your objective is to
characterize the driving forces of competition within an industry. The
purpose of this analysis is to help management create and maintain a
competitive advantage that allows the company to excel in the industry.
The purpose of industry analysis is to review prevailing conditions
within specific industry and its segments. The company's industry
obviously influences the outlook for the company. Even the best stocks
can post mediocre returns if they are in an industry that is struggling.

TELECOM INDUSTRY
The Indian telecommunications sector has
been zooming up the growth curve at a
feverish pace, emerging as one of the key
sectors responsible for India's resurgent
economic growth. It is the fastest growing
telecommunication market in the world, and
with 264.77 million telephone connections, is

13
the third largest telecom market and the second largest among the
emerging economies of Asia with an average growth of over 90%. In
fact, India has achieved its target of reaching 250 million telephone
subscribers by 2007, two months before time. Simultaneously, overall
tele-density has increased to 23.21 percent. Today, the Indian telecom
industry represents unique opportunities for U.S. companies in the
stagnant global scenario. According to Broadband Policy 2004,
Government of India achieves the target of 9 million broadband
connections and 18 million internet connections in 2007. In the last 3
years, two out of every three new telephone subscribers were wireless
subscribers. Consequently, wireless now accounts for 54.6% of the total
telephone subscriber base, as compared to only 40% in 2003. Wireless
subscriber growth has bypassed 2.5 million new subscribers per month in
the 2007. The wireless technologies currently in use are Global System
for Mobile Communications (GSM) and Code Division Multiple Access
(CDMA). There are primarily 9 GSM and 5 CDMA operators providing
mobile services in 19 telecom circles and 4 metro cities, covering more
than 2300 towns across the country.

HISTORY
In 1880, two telephone companies namely “The Oriental Telephone
Company Limited” and “The Anglo-Indian
Telephone Company Limited” approached
the Government of India with the objective
of establishing Telephone Exchanges
across the country. Initially, the

14
Government denied the permission as it wanted to exercise its monopoly
power over the promising industry once it emerged. By the following
year, it changed its decision and finally on 28 the January, 1882, license
was granted to The Oriental Telephone Company Limited of England for
opening telephone exchanges at Kolkata, Mumbai, Chennai and
Ahmadabad.

Evolution of the industry-Important Milestones

History of Indian Telecommunications

Year

1851 First operational land lines were laid by the government near
Calcutta (seat of British power)
1881 Telephone service introduced in India

1883 Merger with the postal system

1923 Formation of Indian Radio Telegraph Company (IRT)

1932 Merger of ETC and IRT into the Indian Radio and Cable
Communication Company (IRCC)
1947 Nationalization of all foreign telecommunication companies
to form the
Posts, Telephone and Telegraph (PTT), a monopoly run by the
government's Ministry of Communications
1985 Department of Telecommunications (DOT) established, an
exclusive
provider of domestic and long-distance service that would be
its own regulator (separate from the postal system)
1986 Conversion of DOT into two wholly government-owned
companies: the
Videsh Sanchar Nigam Limited (VSNL) for international
telecommunications and Mahanagar Telephone Nigam

15
 Limited (MTNL) for service in Metropolitan areas.

1997 Telecom Regulatory Authority of India created.

1999 Cellular Services are launched in India. New National

Telecom Policy is adopted.
2000 DoT becomes a corporation, BSNL

2001 Convergence Bill to promote, facilitate and develop the

carriage and content of communications tabled in the
Parliament.

Policy for GMPCS service has been announced.

Policy for PMRTS has been announced. Policy for UMS was
announced.

2002 VSNL came under private management.

International Long Distance Service opened for private

competition.

Internet telephony was started.

Targets (by 2010):

 500 million telephone connections

 Broadband: 20 million subscribers
 Geographical coverage: 90%
 Rural Connections: 80 million

Scope

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  Showcase the latest products, formulation and capabilities.

 Opportunities for transfer of technology, setting up of R&D base

with
International firms.

 Joint ventures, collaborations and investment opportunities.

 Supply of machineries, process control equipments, projects and

services etc.

 One-to-one business meetings and networking opportunities.

Indian Economy
An economy is the system of human activities related to the
production, distribution, exchange, and consumption of goods and
services of a country or other area.
The composition of a given economy is inseparable from
technological evolution, civilization's history and social organization, as
well as from Earth's geography and ecology,

India's economy is on the fulcrum of an ever increasing growth

curve. With positive indicators such as a stable 8-9 per cent annual
growth, rising foreign exchange reserves, a booming capital market and a
rapid rise in FDI in the last year, India has emerged as the second fastest
growing major economy in the world.

The economy has been growing at around 9 per cent in the past
two years recording a growth rate of 9 per cent and 9.4 per cent in 2005-
06 and 2006-07 respectively. Significantly, the industrial and service
sectors have been contributing a major part of this growth, suggesting
the structural transformation underway in the Indian economy.

For example, industrial and services sectors have logged in a 10.9

and 11 per cent growth rate in 2006-07 respectively, against 9.6 per and

17
9.8 cent in 2005-06. Similarly, manufacturing grew by 9.1 per cent and
12.3 per cent in 2005-06 and 2006-07 and trade, hotel, transport and
communication recorded a growth of 10.4 per cent and 13 per cent,
respectively.

Independent India’s economic development program has been

based on the key objectives of self-reliance and social equity. Till the
eighties, India’s industrial policy created India’s industrial base under a
system of licensing, strict foreign exchange controls and excessive
protection from imports, which protected even inefficient and
internationally non-competitive enterprises.
In 1991 the Central Government embarked on a program of
economic liberalization. This included, among others removal of
governmental control,
rationalization of regulation,
attracting Foreign
Investment. The
government has also
identified the infrastructure
sector (Power,
Telecommunications, and
Transportation) as a key
target and is taking steps to attract investments in the area. Encouraged
by economic developments over the past decade, the government is
committed score a GDP growth rate 9% by the year 2005. The fact is that
the Indian economy is growing faster than ever before. Between 1992-93
and 1997-98, India's GDP at 1980-81 prices has recorded a trend growth
rate of 5.4 per cent. Never once has the growth rate fallen below 5 per
cent since 1991-92 when it grew by only 1 per cent and when the
economic liberalization process started.

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Telephones in Rural and Remote Areas
Promotion of rural telephony and accessibility of telephones to
remote areas is an important thrust area of the department. The
Universal Service Obligation Fund (USOF) of India is one of the few
operational USO Funds in the world. The scope of USOF covers rural and
remote areas with public access and individual household telephones in
Net High Cost rural and remote areas. Under USOF, a scheme has been
launched by the Government to provide support for setting up and
managing 7871 number of infrastructure sites spread over 500 districts in
27 states of the country for the provision of mobile services. The
infrastructure so created, shall be shared by three service providers for
provision of mobile services including other Wireless Access Services like
Wireless on Local Loop (WLL) using Fixed/Mobile terminals in the specified
rural and remote areas, where there is no existing fixed wireless or
mobile coverage. Mobile services through these shared towers are
targeted to be made operational in a phased manner by May 2008.

Broadband
Recognizing the potential of Broadband service in the growth of
GDP through enabling the development of knowledge based society, the
government has announced Broadband Policy 2004. Several measures
have since been taken to promote broadband in the country. As a result
of these measures, broadband subscribers grew from a meager 0.18
million as on 31, March 2005 to 2.61 million, up to September 2007.

INVESTMENT AND GROWTH

In 2005-2006, the telecom industry witnessed a growth of 21% with
total revenue of Rs. 86,720 crores, and the total investment rising to Rs.
2, 00,660 crores. It is projected that the telecom industry will be enjoying
over 150% growth in the next 4-6 years. The growth also requires a huge

19
investment by the players in the sector. Bharti Airtel is planning to invest
about $8 billion by the year 2010.
Liberalization policy and some socio-economic factors are mainly
responsible for the immense growth in the sales volumes. The lifestyle of
the people has changed. They need to be connected to the other people
all the time. With the
lowering down of the
tariffs the affordability of
the mobile phones has
increased. The finance
sector has also come up
with loans for handsets
on 0% interest. Mobile
services providers are
also expanding their coverage area by installing more and more antennas
and other equipments.
Budget 2007 has brought disappointment to the telecom sector.
Mobile service providers have been asked to cut down their roaming
rentals as well as their long distance and international call tariffs. This has
led to discontent on the part of the service providers. However, Telecom
Regulatory Authority of India (TRAI) is of the opinion that this will lead to
increased use of roaming, which will ultimately lead to more revenue
generation. Moreover, with cheaper handsets and lesser tariffs, it is
expected that by the year 2010 there will be over 500 million subscribers
in the Indian telecom market.
The Total Market (TM) for semiconductors in India in 2005 is
estimated at $2.82 billion and the telecommunications market accounts
for about 45.4 percent of the TM. The Total Available Market (TAM) for
semiconductors in India was valued at $1.14 billion in 2005 and the

20
telecommunications market accounts for 8.0 percent of the TAM. Bulk of
the telecommunication equipment is imported as CBUs and SKDs. The
larger share of the imports in the telecommunication market reflects in
the higher TM and lower TAM. The study is comprehensive and it covers
all the major telecom products contributing the semiconductor TM and
TAM. The major markets of the telecommunication industry that are
covered in this study include Wireless handsets (GSM and CDMA),
Wireless infrastructure equipment , Wire line switches, Access network
equipment, Electronic push button telephones, PBX systems, Modems and
VoIP phones. The wireless handsets and wireless infrastructure
equipment together hold major share of about 88 percent of the
telecommunication TM in 2004. However, with respect to TAM, wire line
switches are the major segment due to the presence of domestic
manufacturing base.

21
Telecoms and India’s Growth

Communications is the fastest growing sector in India’s economy.

The average compound rate of growth of the economy works out to 24.02
per cent per annum since the turn of this millennium (Table 2). No other
sector of the economy has clocked such a rate of growth. The sector
accounts for about 4 per cent of GDP and the recent high rate of growth
has contributed to about
11 per cent of the growth in overall
GDP of the country. In
information and communications
technology (ICT), it is again
communications that
is more important. This is evident from a dataset on ICT spending
developed by World Information Technology and Services Alliance (2006),
of the total spending on ICT by India, about 63 per cent was in
communications. The communication sector comprises both services and
equipment manufacturing, although in the above characterization the
data refers only to the services segment. The domestic production of
telecom equipments has shown some impressive increases during the
period since 2001, but it accounts for only about 15 per cent of the total
telecoms industry. With some fluctuations, the equipment sector is slowly
seeing a decrease in its share in the total revenues of the
telecommunications industry.
Dimensions of Growth
In 1991, India had just five million telephone subscribers. As at the
end of July 2007, there were 233 million subscribers, an average annual
growth rate of over 27 per cent per annum. No other country in the world,

22
other than China, has shown such high rates of growth (see Table3).
Teledensity too which was below one telephone per 100 population has
now risen sharply to about 20. Among the infrastructure industries,
telecommunications is the only one that has shown significant
improvements over the reform period. Consequently, it is generally
opined that a revolution of sorts is taking place in the Indian telecoms
industry. There are at least seven dimensions of this growth performance
that merit our attention.
(i) Dominance of Wireless Technology: The Indian telecom sector is
now heavily dominated by wireless technologies, which include cellular
mobile and fixed wireless technologies. In fact, almost the entire increase
in the availability of
telephones has been contributed by
wireless technologies. India has
one of the highest ratios of
wireless to wire-line services,
which is now almost five (Table 3, p
39). In fact what is interesting is
that since 2005, the wire-line
services have started falling. A
number of factors explain this decrease in the popularity of fixed
telephones, which has now become a worldwide trend. This heavy
reliance of wireless technologies, while extremely positive from the
availability point of view, has some implications for the diffusion of the
internet in the country. This will be analyzed in some detail in one of the
subsequent sections.

(ii) Growing Market for Telecom Handsets: As a corollary of the

above, it is seen that there has been a steady increase in the average

23
number of mobile subscribers per month since 2003. In 2003, on an
average 1.5 million new subscribers were added to the existing stock.
This increased to 6.4 million until September 2007. These large increases
in the number of mobile handsets have strong positive implications for
the telecom equipment industry and specifically the mobile handsets
industry, which means that close to six million handsets are being sold
every month. Consequently, a huge domestic market for telecom
equipment has suddenly emerged in the country spawning the creation of
a significant manufacturing base. Chennai has become a thriving cluster
for mobile handsets manufacturing and this has important implications
for the downstream industries such as the semiconductor industry. This
point will be discussed at some depth in the fourth section.
(iii) Increasing Privatization: The share of the private sector in the
overall telecoms industry has been raising and the ratio of private to
public actually crossed unity in 2006. This again is due to the fact that the
public sector is more dominant in wire-line (or fixed) and the private
sector is dominant in the wireless (mobile) segment. This sort of a
structure is largely the product of historical reasons. The two public
sector service providers (BSNL and MTNL) dominated the wire-line sector,
while the private sector was able to dominate the new wireless
technology. In fact it was only in the late 1990s, early 2000s that the
government allowed the public sector entities to provide wireless
communication services.
(iv) Competition – Fixed v/s Mobile and GSM v/s CDMA: An
interesting feature of the industry is
that after a very long time, it has
suddenly become very competitive.
There are three dimensions to this
competition. First, it is competition

24
between two standards or technologies, namely, the Global System for
Mobile Communications (GSM) v/s Code Division Multiple Access (CDMA)
standards. Second, it is competition between various service providers,
although this competition was restricted to public policy designed spaces
or markets known as telecom circles. A yet another dimension is the type
of market. There are essentially three types of markets based on the
geographic coverage of the service. They are: (i) the local telephone
market; (2) long distance or national telecom services; and (3) foreign or
the overseas market. We focus here on all the three dimensions of
competition between the service providers.
Competition in Fixed and Mobile Technologies: The markets for
mobile services are much more competitive than the one for fixed line
services. In the latter, the incumbent service provider, BSNL continues to
have the lion’s share of the market. However, the existence of mobile
communication services has made the market for fixed line services
contestable and as a result despite high concentration, the prices of fixed
telecom services kept falling or kept under check over the last five years
or so.
(a) Competition in Fixed Telephone Services: If one goes by overall
summary measures of domestic competition, the market for fixed
telephone services is much more concentrated than the one for mobile
services. For instance (as on May 31, 2007), The market for fixed telecom
services is highly concentrated in all the telecom circles, although in
seven of them, namely, Delhi-NCR, Chennai, Madhya Pradesh, Mumbai,
Punjab and Karnataka, the H-Index has a value less than 0.8. Of course,
this does not mean that the market for fixed telecom services is not
competitive. There are two dimensions to this level of competition for
fixed services. First, the consumers are increasingly substituting mobile
for fixed services, so the fixed service providers face intense competition

25
from mobile services. Second, the existence of the telecom regulator too
has acted as a check on the dominant service provider, Bharat Sanchar
Nigam (BSNL), from charging high prices. Instead what one sees is a
significant improvement in the performance of BSNL during this period.1
First of all, BSNL is one of the leading profit-making central public sector
enterprises in the country: in 2005-06 it made a net profit of Rs 8,940
crore – one of the few non-oil public sector enterprises (PSEs) in the top
10 profit-making PSEs in the country. Three areas where the firm has
made performance improvements are: (i) considerable reductions in the
number of consumers on the waiting list for a connection; (ii) reductions
in the number of faults per subscriber; and (iii) number of personnel per
1,000 subscribers. On all the three indicators BSNL has made substantial
progress [Department of Telecommunications 2007] and I argue that this
is entirely due to the force of competition leading to efficiency gains for
this rather monopolistic firm which has had a previous history of being
completely impervious to the demands of consumers.
(b) Competition in Mobile Services Industry:
Compared to the fixed services,
the mobile services industry has a
number of distinguishing features.
First, the industry started as one
dominated by private sector
enterprises and the government
religiously followed a policy of
“managed competition” by licensing
more than one service provider in a telecom circle. In fact majority of the
28 circles have at least four services providers and in a number of cases
there are six service providers well. In short, right through inception the
government envisaged an oligopolistic form of competition. Second, most

26
of these private sector enterprises had some of foreign equity holding of
sorts. Third all of them are based on new technologies that were state-of-
the art. Fourth, the conduct of the industry was, relatively speaking, more
regulated by the newly created independent regulatory agency, the
Telecom Regulatory Authority of India (TRAI). Fifth, it is the rapid growth
of this industry that has catapulted the communications sector into one of
the major growth-contributing sector of India’s economy. Sixth, the
mobile communications industry, especially the equipment part of the
industry is the second largest in the world (next to China) and therefore
has attracted considerable FDI in the manufacture of handsets leading to
the employment of skilled manpower. Seventh, India is supposed to be
having the cheapest mobile telecom tariffs in the world. Since all the
services providers were new and had the same vintage of technology,
their competition was more in terms of price and conditions of sale and of
late these two aspects are much in public scrutiny thanks to the timely
intervention, on various occasions, by the regulator. If one computes the
H-Index for the industry, at the national level (which is not exactly a
meaningful as some of the providers are only at specific telecom circles),
it shows a mild increase: the H-Index for the industry increases from
0.1370 in 2002 to 0.1593 in 2007. Most of the service providers have
focused on specific regional markets, with the exception of Bharti (the
largest mobile service provider). In fact, there are only four service
providers who have a presence in at least 20 of the 29 circles. It is also
interesting to see that the circles where BSNL has a monopoly position
are also those with very low revenue potential. In other words, the private
sector providers have positioned themselves in the most revenue earning
circles. Also it is seen that it is the circles with high revenue earning
potential where there has been an increase in the intensity of competition
– in the metros of Delhi, Mumbai and Chennai for instance.

27
Competition between Mobile Standards: It was seen above that
mobile phones were introduced in the country towards the latter half of
the 1990s and specifically in 1997. Ever since that year and until the end
of 2002, the market was dominated by
just one technology, namely, GSM. But in
December 2002, a Reliance Info-com
launched CDMA services across 17
circles on a countrywide basis. CDMA
has since been growing faster than GSM,
although there are some year-to-year
variations (see Figure 3, p 41). Most
Indian consumers are unaware of the
nitty-gritty of the two technologies. So
the deciding factor between the two technologies is often based on price
and other conditions of offer such as the coverage of the service ease of
obtaining a new connection and whether a handset is available at a
reduced price as part of the deal. Given this sort of a possibility of perfect
substitution between the two types of technologies, the existence of the
two standards has made both the markets for GSM and CDMA services
very competitive. This is especially so when the market for CDMA services
is highly concentrated with just two service providers accounting for
almost the entire output. This is further indicated by the higher Herfindhal
Index for CDMA services. What is being argued here is that despite being
highly concentrated, CDMA service providers have to compete with GSM
service providers and this has prevented the CDMA service providers
from wielding any excessive market power. One of the most important
institutional requirements for competition to emerge and sustain is the
introduction of number portability. Number portability allows a customer
to move from one mobile service to another within GSM, and also

28
between GSM and CDMA, while retaining the same number. TRAI had
recommended in March 2006 to the Department of Telecommunications
(DoT) that mobile number portability be introduced by April 2007.
(v) Price of Telecom Services: One of the more direct effects of this
competition is lower prices. Before the deregulation of the telecom
services industry and indeed the entry of mobile service providers,
telecom consumers were periodically subjected to increases in the tariff.
This has now been effectively checked. The price of telecom services
basically follows a two-part tariff,
both in the case of fixed and
mobile services: first an activation
charge followed by a charge for
each type of calls. For mobile
communication consumers then
there is the additional cost of calls
according to whether it is post or
prepaid. Based on estimates made
by TRAI (2006), I have obtained the minimum effective charge derived
out of an outgoing usage of 250 minutes per month per quarter during
2003 through 2005. This is plotted for both fixed and mobile services as
well. Although charges for both the calls have come down, a higher
reduction is noticed in the case of mobile services. In fact, India now has
one of the cheapest mobile tariffs in the world (Table 7) and this can give
an additional fillip to the growth of ICT industry in the country. If one were
to plot the price of telecom services and the number of subscribers, one
can see an inverse relationship in the case of mobile services although in
the case of fixed services such an inverse relationship is not visible. This
is because of the relative advantages which mobile technology can
bestow on its user.

29
(vi) Institutional Support: An interesting feature of the growth of
telecommunications industry in the 1990s and beyond, compared to the
earlier period is the strong public policy support that the industry has
received. It was manifested in the form of the following policies: (i)
National Telecom Policy of 1994, (ii) Telecom Regulatory Authority Act of
1997, (iii) New Telecom Policy of 1999, and (iv) Broadband Policy of 2004.
Of these four main policies, in my view, the most important piece of
legislation that is determining the growth performance of the industry is
the establishment of the regulatory agency TRAI.2 the 10-year history of
telecommunications regulation in India can be divided into two phases:
the first covering the period 1997- 2000, when TRAI had just been
established and the second covering the period 2000 onward, when
considerable amendments were made to the original TRAI Act. On the
whole, TRAI’s functioning has been marred by a number of bitter disputes
between it, the DoT and the service providers, although in more recent
times (especially since 2001) it has been rather effective in shaping the
conduct of the industry in terms of pricing behavior and indeed in quality
of service. TRAI’s functions can be broadly categorized into two:
recommendatory and mandatory. It is seen that in most of the important
conduct variables such as the promotion of competition, pricing,
technology and quality of service and in the efficient use of spectrum,
etc, the pronouncements of TRAI are merely recommendatory and the
final decision is to be taken by the government. The mandatory powers of
TRAI are restricted to a number of technical issues such as fixing the
terms and conditions of inter-connectivity between the service providers,
laying down the standards of quality of service and to ensuring that these
conditions are actually met by the service providers and ensuring the
effective compliance of the Universal Service Obligation.

30
 After a detailed review of its functioning during the earlier period
(1997-2000), Mani (2002) referred to the TRAI as a “muddled regulator”.
This is because during this phase, TRAI’s functions were poorly
articulated, and it was generally viewed as driven by the well-organized
and vociferous lobby of private phone service operators. TRAI did little to
hide its pronounced contempt for the DoT and the state-owned providers,
BSNL and MTNL. At the same time, it failed
to ensure that private operators adhered to
their license conditions. Its authority and
credibility were undermined by court rulings
that clearly exposed its lack of power. Its
reputation suffered even more when it
allowed the private operators to fight its
court battles. In short, it would not be
incorrect to state that there was “regulatory
capture” during this first and initial phase of
its operations.
TRAI’s recommendations to the
government are binding only with respect to
the non-compliance and efficient use of the
spectrum. On the crucial issues of timing and
licensing of new service providers, TRAI’s
recommendations are not binding. In sum,
the TRAI has been reduced to a tariff setting
body empowered only to fix tariffs and inter-
connection charges and to set norms on quality of service. And on these
two and especially on the tariff issue, TRAI’s role is generally considered
to be very satisfactory.

31
(vii) Growing R&D Outsourcing: It is generally held that India has
emerged as a major R&D hub. The Technology Information and
Forecasting Assessment Council (TIFAC) (2007) study confirmed this
commonly held proposition: R&D investment worth of $ 1.13 billion has
flowed into India during the five-year period 1998-2003. The total receipts
of R&D services have doubled from $ 221 million in 2004-05 to $ 519
million in 2005-06 [Reserve Bank of India 2006, p 1355].

Three Disquieting Features

In the previous section I have outlined several dimensions of the
growth of the industry. All these were positive features – the phenomenal
growth of the industry, significant
reductions in the waiting time to get a
telephone connection and indeed in the
price of telecom services. However, this
growth has also been with some
disquieting features. Three such
disquieting features of the growth of the
industry have been identified. They are:
(1) the growing digital divide; (2)
increased dependence on imports as far
as the equipment is considered; and (3)
the relatively low penetration of the
internet in India.

(i) The Growing Digital Divide: Several commentators, notably Desai

(2006), had referred to the growing inequalities in the availability of
telephones especially between states and indeed between the rural and
urban areas within a state. This is so severe that the national picture that

32
I presented above is only representative of the urban areas of some of
the states. This growing digital divide, as it is usually referred to, is of
course a reflection of the growing divides within the country as far as
income and wealth is considered. The ratio of urban to rural tele-density,
which was falling until 2002 has started rising again since 2003 and in
2005 was much higher than what was in 1996, when the mobile
revolution was just about to begin. To illustrate, the ratio of urban to rural
tele-density increased from 14 in 1996 to nearly 20 by the end of 2005
[Department of Telecommunications 2006]. A yet another dimension of
the digital divide is the variation in teledensity across the various telecom
circles (Table 9). Teledensity (in 2005) ranged from as high as 60 per 100
people in the national capital region to just two in the backward state of
Chhattisgarh. The urban divide within each of the telecom circles is
presented in Table 9. It shows that Kerala, Tamil Nadu (excluding
Chennai) and Punjab have one of the lowest urban-rural divides, while
Uttar Pradesh, Bihar and Assam have the highest digital divides. The
table also shows that rural teledensity is significantly below the urban one
across all the circles and even for the nation as whole it has remained at
a very low level. This confirms the oft-expressed view that the telecom
revolution spearheaded by the mobile phones has remained largely an
urban phenomenon. The government has put in place an institutional
arrangement for bridging the digital divide. Specifically, the National
Telecom Policy of 1999 envisaged implementation of the Universal
Service Obligation (USO) Fund to provide telecom services in rural,
remote areas and non-remunerative areas. This fund is raised through a
“universal access levy”, which is 5 per cent of the adjusted gross revenue
earned by the service providers under various licenses. The Universal
Service Support Policy for Implementation of USO took effect from April 1,
2002. It is administered by the DoT and it has three major components:

33
(1) providing public shared access; (2) providing individual access; and
(3) infrastructure support for mobile service providers. The latter policy is
on the anvil and is yet to take shape. The overall performance of the USO
fund is far from satisfactory, as cumulatively
speaking only about a third of the funds
accumulated have actually been disbursed.
The service providers, excepting for the
state-owned BSNL, are rather reluctant to
provide shared access. However, the private
providers are keen to participate in the
provision of individual access in rural areas
as it is more profitable than providing shared
access [Department of Telecommunications
2007]. Hitherto, the USO funds have been
utilized only for provision of fixed line
connections. Given the fact that the future is
in mobile communications, it is prudent to
involve mobile service providers too. Some
amendments made to the utilization of USO
funds have expanded the scope of the funds
to include more items.3 The following
additional four items were included: (i)
Creation of infrastructure for provision of
mobile services in rural and remote areas;
(ii) provision of broadband connectivity to villages in a phased manner;
(iii) creation of general infrastructure in rural and remote areas for
development of telecommunication facilities; and (iv) induction of new
technological developments in the telecom sector in rural and remote
areas. Only the first of four are in the form of some implementation. In

34
fact, the four metros have ceased to be the major force behind the
growth of the mobile connections in the country. Encouraging the growth
of mobile communications in the other circles and the rural areas within
the circles can increase tele-density in the country. Such increases in
tele-density through mobile phones also have some negative
consequences, which is discussed below.

(ii) Import Dependence for Telecom Equipment: The country had

earlier assiduously built up a domestic telecom equipment manufacturing
industry in all the three segments of the industry, namely in switching,
transmission and terminal equipment. Until 1985 or so, the manufacture
of telecom equipment was exclusively reserved for the public sector,
when in that year certain customer premises equipments like the
Electronic Private Automatic Branch
Exchanges (EPABX) were thrown open
to the private sector. In fact, the very
first public sector enterprise
established in independent India,
Indian Telephone Industries (ITI) was
devoted to the manufacture of
telephone switching and terminal
equipment. In 1985, the government
established the stand-alone laboratory,
Centre for Development of Telemetric
(CDOT) to develop a family of digital switching technologies, which it
licensed to both government and private sector enterprises. In fact, Mani
(2005) had argued that the C-DOT is credited with the establishment of a
modern telecom equipment industry in the country. The government’s
policy of public technology procurement practiced through its DoT, which

35
was the only telecom service provider for a very long time until the late
1980s also contributed to the emergence and sustenance of a domestic
manufacturing industry in telecom equipment which fitted very well with
the overall policy of import substitution that being followed. The
deregulation of both the equipment and services industries, the
liberalization of the economy, the virtual abandoning of the public
technology procurement policy and above all the growth of the mobile
communications industry put a leash on the growth of a domestic
manufacturing industry. This is because both the research and production
components of the industry focused only on fixed telephone technologies
and with the mobile communications becoming very important, the
demand for such equipment had to be increasingly met through imports. I
have attempted to estimate the net self-sufficiency rate for India’s
telecom equipment industry during the period 1992-93 to 2004-05.

36
iii) Low Penetration of the Internet: Internet services in India were
launched in 1995 by Videsh Sanchar Nigam (VSNL). By the end of March
1998, the number of subscribers had barely reached 140,000. In
November 1998, the government recognized the need for encouraging
the spread of the internet in the country and opened the sector for
provisioning of services by private operators. To date there are 389 ISP
licensees, but only 135 are operational. Public sector providers dominate
with 56 per cent of the market (2006).. Approximately 60 per cent of the
users still use dial-up internet access. Broadband access was introduced
in October 2004, but its diffusion remains low. According to TRAI
estimates (Table 10, p 43), there were 9.27 million internet subscribers as
of end March 2007 and 2.34 million broadband subscribers.
Only about a quarter of the internet subscribers have changed over
to broadband access technologies. Majority of the subscribers use the
older dial-up technologies for accessing the internet. According to a
recent study on internet in the country by the internet and Mobile
Association of India (2006), almost 76 percent of PC users have taken
internet connections. This means that the two technical reasons militating
against the higher internet diffusion in the country is the lack of
ownership of PCs and not having a fixed telephone for accessing the
internet. Although it is possible to access internet over a mobile phone,
the current generation of mobile technology that is common in the
country is 2 G and 2.5 G. Of course, it is generally held that whenever the
country moves over to 3G phones, accessing the internet over mobile
phones is easier. But given the much higher prices of 3G handsets, it is
not very likely that its diffusion will be high in the initial years. So the low
internet diffusion in the country is a direct consequence of the country
becoming too reliant on mobile phones.

37
Major Players:

There are three types of players in telecom services:

 State owned companies
 BSNL
 MTNL
 Private Indian owned companies
 Reliance Communication
 Tata Teleservices
 Bharti airtel
 Tata Communication
 Foreign invested companies
 Vodafone-Essar
 Bharti Tele-Ventures
 Idea Cellular

38
 3. Research Methodology

3.1 Problem Statement:

“An Industry analysis of Telecommunication sector”

3.2 Research Objective:
➢ To study the emerging trend of telecom sector
➢ To study the opportunity exist for telecom market
➢ To know the future out let of telecom sector
➢ To know the emerging technologies in the telecom sector
➢ To study the financial performance of telecom sector
3.3 Research design:
➢ Descriptive
Descriptive study is used to study the situation. This study helps to
describe the situation. A detail descriptive about present and past

39
 situation can be found out by the descriptive study. In this involves
the analysis of the situation using the secondary data.
3.4 Data collection method:
➢ Secondary data
This report is based on the secondary data, which is collected through
internet and various magazine or news paper, for evaluation purpose
the data collected through www.nseindia.com,
www.businesstoday.intoday.in

Site.

3.5 Method of analysis:

➢ SWOT analysis

➢ Ratio analysis

1. Profitability Ratio 4. Liquidity Ratio 6. Per share ratio

2. Payout Ratio 5. Leverage Ratio

Limitation of the Study

➢ As the project based on the secondary data the data may not be

updated.

➢ The data are collected from the various sources as they may not be

accurate.

40
 4. DATA ANALYSIS & INTERPRETATION

BHARAT SANCHAR NIGAM LIMITED (BSNL)

Founded in 2000, Bharat Sanchar Nigam Ltd. is India's largest

public sector Telecommunications Company providing a wide variety of
telecom services. Its service range covers Wire line, CDMA mobile, GSM
Mobile, Internet, Broadband, Carrier service, MPLS-VPN, VSAT, VoIP
services, IN Services, etc.

In 2005-06, the BSNL earned revenues of Rs. 40,177 crore,

representing a growth rate of 11.32 % over the previous year. BSNL's

41
Board of Directors consists of CMD Shri A.K. Sinha & five full time
Directors- Director of Human Resource Development (HRD), Director of
Planning & New Services, Director Operations, Director Finance and
Director of Commercial & Marketing.
BSNL offers both fixed line and mobile services with broadband
connections.

BHARTI-AIRTEL

Established in 1995 by Sunil Mittal as a Public Limited Company,

Airtel is the largest telecom service provider in Indian telecom sector.
With market capitalization of over Rs. 1,360 billion, Airtel has 31% of total
market share of GSM service providers. Providing GSM services in all the
23 circles, Airtel was the first private player in telecom sector to connect
all states of India. Also, Airtel is the first mobile service provider to
introduce the lifetime prepaid services and electronic recharge systems.
After establishing itself in the domestic market, Airtel is now spreading its

42
wings in US by providing its mobile service under the name 'CALLHOME'
to the NRIs.
Having achieved huge success in mobile services- postpaid and
prepaid- Airtel has now entered fixed-line telephony providing broadband
services in 92 cities across India. The company has an optical fiber
network of 35,016 km and a customer base of 35,440,406 GSM mobile
and 1,819,083 broadband subscribers.
Airtel is listed on The Stock Exchange, Mumbai (BSE) and The
National Stock Exchange of India Limited (NSE).

Bharti Airtel

Bharti group plans

to roll out cellular
services under Airtel
brand in SAARC
countries like Bhutan,
Nepal, Maldives, etc. It
will soon start
exploratory talks with

43
relevant telecom regulators to secure GSM licenses to operate 2G/3G
mobile services in these countries. It has no plans to take the Airtel brand
to Pakistan.
Bharti's bid to enter SAARC markets comes at a stage when the
Indian govt is trying to play a decisive role in bringing about a sharp
reduction in the ultra‐high global roaming rates within the SAARC group.
Bharti Airtel plans to kick off cellular services in Sri Lanka by April 2008.
While telecom penetration in Sri Lanka is 30%, there's a huge opportunity
for new entrants.
Bharti Airtel and Western Union today decided to jointly develop
and pilot a Mobile Money Transfer service in India. They expect the
service to be launched within the next six months. Only banks and the
Indian Post, through money orders, are currently allowed such transfers.

RELIANCE INFOCOMM

Established in 2002, Reliance communication is the wholly owned

subsidiary of Anil Dhirubhai Ambani Group of Companies providing the
telecommunication services.
Reliance offers prepaid and postpaid mobile services with R-world
and fixed line services with broadband services. During the financial year
2005-06, Reliance's subscriber base had crossed the mark of 25 millions.
Having its operations in 673 cities, Reliance Communications offers a

44
wide range of telephony services. The company's business line varies
from providing Fixed Line Telephony services to wireless mobile
telephony services.

Reliance is the only telecom company that is providing mobile

services over both- CDMA and GSM networks. With an optical fiber
network of 80,000 kms, the company aims at providing best services to
its customers. It also has 15,000 Base Transceiver Stations across the
country providing reliable wireless network.

Reliance Communication

RCom has an upper

edge over all its rivals and is
a step ahead than the major
telecom players.

45
Department of Telecom has awarded an India GSM license to Reliance
Communications. The company had already paid the requisite license fee
of Rs 1,651 crore for an India GSM license on October 19, 2007, after
DOT, in its new telecom policy, had said telcos could offer services using
dual technology.
The license will guarantee that RCom will be in queue for GSM
spectrum ahead of the 46 others that have applied for licenses recently.
The development comes even as leading GSM players have challenged
the policy of allowing dual technology in the telecom tribunal.
RCom will now have to wait for DOT to allot 4.4 MHz of GSM
spectrum in each of the circles to launch commercial operations.

IDEA CELLULAR

Established by AT&T, Aditya Birla Group and Tata Group as joint

venture, Idea Cellular, is a part of Aditya Birla Nuvo, a flagship company
of the Aditya Birla Group, Idea is growing its network in 11 circles. Idea
offers both prepaid and post paid services in the GSM network. Having

46
13% market share, Idea has a base of 2.3 crores subscribers all over the
country. A three-year contract was signed between Idea cellular and
Ericsson for GSM expansion. The network will now cover Maharashtra,
Gujarat, Rajasthan, Madhya Pradesh and Himachal Pradesh telecom
circles (operator-licensed areas). Idea is also in the process of setting up
new networks to provide wider coverage area to its subscribers. It also
keeps on announcing attractive discount schemes for the value added
services.

Idea was the first cellular service provider to launch GPRS and
EDGE in the country. For the very first time in India, 'Background Tones',
'Group Talk', 'Super Power', 'Women's Card', etc. were launched by Idea.
Idea has remained popular among the customers because of tariff plans
such as free I -I calls, '2 Minutes Outgoing Free', and other discount
schemes and GPRS enabled services.

Idea Cellular
Aditya Birla group
firm Idea Cellular is a

47
wireless telecom company, operating in various states of India. Idea
Cellular was the first to offer flexible tariff plans for prepaid customers. It
also offers GPRS services in urban areas.
The Ericsson Idea Cellular $100m contract could be a precursor to
Idea Cellular getting spectrum from the Government to commence
services in the Circle.
The company will also be responsible for network deployment and
integration, as well as managed services including network and field
operations. Rollout is planned to begin shortly, with commercial launch
rescheduled for May 2008.

TATA TELESERVICES:

Established in 1996, Tata Teleservices, one of the 96 companies of

Tata Group, has its network in 20 circles. It is the first company to launch
CDMA mobile services in India. With investment of Rs.36, 000 crores
during financial year 2005-06, Tata Teleservices has reached the mark of
1.07 crore subscribers.

48
 The company covers a wide range of services like Mobile services,
Wireless Desktop Phones, Public Booth Telephony and Wire line services.
It also offers some value added services like voice portal, roaming, post-
paid Internet Services, 3-way conferencing, group calling, Wi-Fi Internet,
USB Modem, data cards, calling card services and enterprise services.
Tata Teleservices has partnered with Motorola and Ericsson for
providing reliable services to its customer base. Tata Teleservices Limited
along with Tata Teleservices (Maharashtra) Limited serves over 15.9
million customers (with 75% increase in FY 2007 over March 06-sub base)
covering over 3200 towns. Income from Telecommunication reached to
1,095.13, with 7.9 lakhs mobile subscribers and 8.3 lakhs fixed wireless
subscriber.
Formerly named as Hughes Tele.com (India) Ltd., Tata Teleservices
Maharashtra Limited (TTML) with 70.83% equity shareholding by TATA
Group is the premier telecommunication service provider licensed to
provide services in Maharashtra (including Mumbai) and Goa. In February
2002, the Government of India released 25% of VSNL's equity to Tata
Teleservices.

MAHANAGAR TELEPHONE NIGAM LIMITED

Mahanagar Telephone Nigam Limited popularly known as MTNL is an
India-based telecommunication service providing company. MTNL

49
operates under the guardianship of the Ministry of Communication,
Government of India and Department of Telecommunication, Government
of India. Mahanagar Telephone Nigam Limited operates according to the
telecommunication policy laid as per the Indian Telecommunication Acts
and Rules. MTNL enjoyed virtual market monopoly till the end of the year
2000.
Mahanagar Telephone Nigam Limited operates in two major metro
cities of India, Mumbai and Delhi and this giant telecommunication
company enjoyed complete market leadership till the aforesaid time. With
the entry of private players in the cities of Mumbai and Delhi, Mahanagar
Telephone Nigam Limited lost its market monopoly. This led to lowering
of tariff by the Mahanagar Telephone Nigam Limited.
This Indian telecommunication company is one of the market
leaders in the Indian telecommunication industry and enjoys market
dominance in the area of basic telephony, rural telephony and Internet
connection. Furthermore, the company is also planning to expand its
Internet services and IT related services to help it grow along the lines of
other major telecommunication players operating in India. As per the
latest company policy in accordance with the tenth telecommunication
plan of India, the company is expected to add 27.56 lakh basic telephone
connections along with 11.57 lakh cellular phone connections.

50
LIFE CYCLE CLASSIFICATION OF THE INDUSTRIES
AND/OR MAJOR PRODUCT GROUPS OF THE SECTOR.

SWOT Analysis-:

SWOT analysis can provide a framework for identifying and analyzing

strengths, weaknesses, opportunities and threats

Strengths: attributes of the organization those are helpful to achieving

the objective.
Weaknesses: attributes of the organization those are harmful to
achieving the objective.
Opportunities: external conditions those are helpful to achieving the

51
Objective.
Threats: external conditions that is harmful to achieving the objective.
SWOT Analysis:

| Strength | Weakness

Third largest telecom market Lowest call tariffs in the world.

and the second largest among
the emerging economy of Domestic market saturation.
Asia. Market strongly regulated by
Despite global economic government body governing
recession, telecom is one both ISP and Telecom sector.
sector which is still going Huge potential for low end
strong. cheap handsets.
Huge wireless subscriber Lack of infrastructure facility.
potential.
Language and literacy problem.
Government proposes to hike
FDI limit in telecom to 74%.

Unified license regime.

| Opportunity | Threat

Joint venture, collaborations The quickly changing pace of

and investment opportunities. the global telecommunication in
industry.
An opportunity for new
investor in the telecom sector. Indian Telecom Company could
also be the target for the
To supportive government takeover.
policies and regulatory
environment. To quick changing in technology.

To offer value added services Changing consumer

on GSM, CDMA and IP. preferences.

Foreign investor in form of Political instability.

equity or technology.
Regulatory interference

52
RATIO ANALYSIS:
Ratio analysis is a process of comparison of one figure against
another, which make a ratio, and the appraisal of the ratios to make
proper analysis about the strengths and weakness of the firm’s
operations. The calculation of ratios is a relatively easy and simple task
but the proper analysis and interpretation of the ratios can be made only
by the skilled analyst. While interpreting the financial information, the
analyst has to be careful in limitations imposed by the accounting
concepts and methods of valuation. Ratio analysis is extremely helpful in
providing valuable insight into a company’s financial picture.
For the ratio analysis purpose we have taken five major companies
which are represent the entire industry such company’s are given below.
1. BHARTI AIRTEL LIMITED

53
2. RELIANCE COMMUNICATION LIMITED
3. IDEA CELLULAR LIMITED
4. TATA COMMUNICATION LIMITED
5. MAHANAGAR TELEPHONE NIGAM LIMITED

COMPANY NAME MARKET CAP IN CRORES

Bharti Airtel 108066.23
Reliance Communication 32683.44
Idea Cellular 14368.92
Tata Communication 13181.25
Tata Teleservices 4393.06
MTNL 4136.13
Spice Communication 4044.6

FOUR MAJOR TYPES OF

RATIOS

LEVERAGE PROFITABILITY LIQUIDITY ACTIVITY

RATIOS RATIOS RATIOS RATIOS

PROFITABILITY RATIO:

54
The profitability of a company can be measured by the profitability ratio.
These ratios are calculated by relating the profits either to sales, or to
investment, or to the equity shares. Thus, we have calculating three
profitability ratio.

➢ Operating Margin:
Operating margin is a measurement of what proportion of a company’s
revenues is left over after paying for variable cost of production such a
wages, raw material etc.
EBIT
Operating margin= ______________________
Sales

➢ Gross Profit Margin:

The gross profit margin ratio tells us the profit a business makes on its
cost of sales, or cost of goods sold. It is a very simple idea and it tells us
how much gross profit per Rs. of turnover our business is earning.

Gross profit (Sales – Cost of good sold)

Gross profit margin =______________________________________
Sales

➢ Net Profit Margin:

This ratio is the percentage of sales after subtracting the Cost of Goods

55
Sold and all expenses, except income taxes. It provides a good
opportunity to compare your company's "return on sales" with the
performance of other companies in your industry. It is calculated before
income tax because tax rates and tax liabilities vary from company to
company for a wide variety of reasons, making comparisons after taxes
much more difficult.

Earning after tax (EAT)

Net profit margin = _____________________
Sales

Profitability ratio:

YEAR
RATIO 2006 2007 2008 2009

OPERATING MARGIN 22.342 32.756 31.738 26.33

GROSS PROFIT 12.652 19.906 19.388 14.232

MARGIN
NET PROFIT MARGIN 16.766 13.414 13.888 16.762

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Interpretation:
The above graph represents averages of operating margin, gross profit
margin, and net profit margin of five major companies. Operating profit
margin and gross profit margin have slightly decreased as approximately
5.41% and 5.16% respectively. On other hand net profit margin has
slightly increase as approximately 2.88%. It represent the profit of
telecommunication industry has no influence in recession.
LEVERAGE RATIO:

Leverage ratios are also known as capital structure ratio. They measure
the company’s ability to meet its long-term debt obligation. They throw
light on the long- term solvency of a company.

➢ Total Debt – equity ratio :

Debt equity ratio is calculated to measure the proportion of debts &
equity in capital structure. This relationship is describing the lenders
contribution for each rupee of the owner’s contribution is called debt
equity ratio. This ratio is calculated by dividing by total debt by net worth.
Total debt
Total debt equity ratio=_______________
Total asset

➢ Assets turnover ratio:

The assets turnover ratio measures the efficiency of a firm in

managing and utilizing its assets. Higher ratio indicates the more
efficiency of company in managing and utilizing its assets. So it implies

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that company can expand its activity level without additional capital
investment.

Sales
Fixed asset turnover ratio=________________
Fixed asset

Leverage ratio:

YEAR
RATIO 2006 2007 2008 2009

TOTAL DEBT- 0.61 0.638 1.368 0.648

EQUITY
FIXED ASSET TURN 0.652 0.69 0.656 0.526
OVER

Interpretation:
The above chart represents the averages of total debt-equity ratio and
fixed turn over. Debt equity ratio is calculated to measure the proportion
of debts & equity in capital structure here the ratio is 0.648:1 indicate
total debt proportion is more than total asset and the assets turnover
ratio measures the efficiency of a firm in managing and utilizing its assets
here the ratio is 0.526:1 indicate the efficiency of industry.

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LIQUIDITY RATIO:

Liquidity ratios measure the company’s ability to fulfil its short-term

obligations and reflect its short-term financial strength or liquidity. The
commonly used liquidity ratios are:

➢ Current Ratios:
The current ratio is a measure of the firms’ short term solvency. It
indicates the availability of the current assets in rupees for every one
rupee of current liability. A ratio of greater than one means that the firm
has more current assets than current claims.

Current asset
Current ratio= ________________________
Current liabilities

➢ Quick Ratios
The Quick Ratio is sometimes called the "acid-test" ratio and is one of the
best measures of liquidity. Other means it establishes a relationship
between quick or liquid, assets and current liabilities. Measures assets
that are quickly converted into cash and they are compared with current
liabilities. This ratio realizes that some of current assets are not easily
convertible to cash e.g. inventories.

Quick asset (current asset – inventory)

Quick ratio = _____________________________________________
Quick liabilities (current liabilities – bank overdraft)

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Liquidity ratio:

YEAR

RATIO 2006 2007 2008 2009

CURRENT RATIO 2.35 1.4 1.282 1.388

QUICK RATIO 2.306 1.362 1.236 1.33

Interpretation:
The above chart represents averages of current ratio and quick ratio.
Here current ratio and quick ratio have increase compare to previous
year. It indicate current asset has more value than current liability.

PAYOUT RATIO:

➢ Divident payout ratio:

Divident payout ratio represent the persentage earning paid to
shareholder in dividend.In other world internal growth to give us those
dividend increases that we want each year.

DPS (divedend per share)

Divedend payout ratio= ______________________________
EPS (earning per share)

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➢ Retention Ratio :
The retention ratio is the opposite of the dividend payout ratio. It
represents the percent of earnings credited to retained earnings . In other
words, the proportion of net income that is not paid out as dividends.

Net incom - Dividend

Earning retention ratio= _________________________
Net incom

Payout ratio:

YEAR

RATIO 2006 2007 2008 2009

DIVIDEND PAYOUT 16 19.806 25.75 16.522

EARNING 83.58 78.85 76.87 74.208

RETENTION

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Interpretation:
The above chart indicates averages of dividend payout ratio and earning
retention ratio. Here dividend payout ratio has high changes as
approximately 9.23% decrease to previous year and earning retention
ratio has slightly decrease as approximately 2.66% to previous year.

PER SHARE RATIO:

➢ Earning Per Share

The value is maximized when market price of equity shares is maximized.
EPS is one of the most important ratios which measure the net profit
earned per share. EPS is one of the major factors affecting the dividend
policy of the firm and the market price of the company. Growth in EPS is
more relevant for pricing of shares from absolute EPS.
Profit
Earning per share= ___________________________
Weighted average share

➢ Cash Earnings Per Share :

A measure of financial performance that looks at the cash flow generated
by a company on a per share basis. A company’s cash EPS can be used to
draw comparison to other companies or to the company’s own past
results.

Operating cash flow

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Cash earning per share=__________________________
Diluted cash outstanding

➢ Dividend per share:

Dividend per share represents the dividend over a year for each share
held. On other hand the amount of dividend that a stock holder will
receive for each share of stock held.

Dividend paid to equity shareholder

Dividend per share=________________________________________
Weighted average share

Per share ratio:

YEAR

RATIO 2006 2007 2008 2009

ADJUSTED EPS 12.396 10.968 12.94 14.186

ADJUSTED CASH 18.612 20.614 22.322 25.292

EPS
DIVIDEND PER 1.7 1.8 1.85 1.66
SHARE

Interpretation:
An above graph represents averages of earning per share, cash earning
per share and dividend per share. Earning per share and cash earning per
share have gradually increased as approximately 1.25% and 2.97%

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respectively. Here, dividend per share has look like a constant at that
time.

5. FINDINGS

As my project report operating profit and gross profit margin ratio

have been slightly decrease as approximately 5%. Net profit margin
have been approximately 13%-16%, in 2009 the sector showed a
2.85% increase.
As my project report current ratio and quick ratio have been slightly
decrease approximately 0.20-0.90, in 2009 both ratios have been
increase approximately 0.1
The industry is in booming there are 110million subscriber in 2005 the
target of 250 million subscriber was achieved before 6 month of its
maturity and it targeted to achieved 500 million subscriber in India by
2010 which shows the emerging growth of the company.
The demand for wireless internet and broadband is going to increase
by 40% from 2010 to 2012. The industry players having great
opportunity in this era.
As technological trend wi-max & G3 technology has been introduction
stage, wireless internet has been growth stage and fixed line has been
decline stage.
The telecom sector in India is experiencing a stage of mature growth.
The growth in sales is still above normal. Due to rapid growth of sales
and profit margins, new players are getting attracted to the industry
giving rise to more and more competition.

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6. RECOMMENDATION

The telecom sector is expected to grow up to 500 million subscribers

by 2010 so the investors have the largest opportunity in the service
sector.
Many of the multinational company in the telecom sector are investing
in the Indian market so it became an opportunity for new investors in
the telecom sector.
As my finding is about increasing demand of wireless internet and
broadband services. So the firms in this industry need to think about
this increasing demand and provide more innovative products in
wireless internet and broadband services. So that the
telecommunication industry will grow in future.
To make competitive advantage the Indian players have to provide
free internet service to the students.

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 7. BIBLIOGRAPHY

| Books:
Donald R Cooper & Pamela S Schindler, “Business Research
Methods”, Eighth Edition, Tata McGraw-Hill, New York, 2003
Punithavathy Pandian, “Security Analysis & Portfolio
Management” Edition, Vikas Publishing Housing Pvt. Ltd,
2007.
S.Kevin, “Portfolio Management” Second Edition, Prentice
Hall of India Pvt. Ltd.

| Websites:
www.devashish.com
www.nseindia.com
www.moneycontrol.com
www.businesstoday.intoday.in
http://www.bharatbook.com/telecom and IT

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www.trai.gov.in

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